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Funds to Close Underwriters determine and verify the source of funds used for the down payment and closing costs. They are screening for borrowed money or money that was ill-intended or -obtained. Cash then is a red flag for underwriters. So if you were thinking of using the money you've stuffed in your matress for the last twenty years, you're out of luck. The following are acceptable sources of funds for closing: 1. Liquid assets in any depository institution are acceptable. They must be verified and in some instances "seasoned" or validated through statements for two to three months.
2. Stocks, bonds, mutual funds, etc. or cash equivalent investments. They must be validated through statements from investment companies for the last two months. 3. Sale of existing property. Many times the source of funds for the down payment on a home comes from the equity in a property that will be sold. The sales price of the property being sold is indicated on the loan application and verified by a sales agreement and credit report. 4. Gifts from family members or charitable organizations. Gifts are acceptable as long as there is no repayment requirement. Most loan programs limit the amount of gift funds allowed to 3% to 6%. of the sales price. |
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